Incentives and mechanisms for boosting electronic payments: A case study of the Albanian payments landscape

This paper explores incentive schemes for the facilitation of e-payments in Albania. The paper is motivated by two facts: first, prior research has shown that e-payments are more cost efficient than paper-based payments; second, Albania has fallen behind in terms of e-payment use compared with other Balkan countries. In fact, Albania ranks last in the Balkans in main e-payment indicators, such as debit/credit cards in circulation and e-POS systems installed. This paper proposes a series of incentives and mechanisms that can help the country accelerate the process of transitioning to e-payments in the short and medium run. It does so by focusing only on incentives that need to be provided to consumers and merchants, since they constitute the main demand and supply sides, at least for retail payments. The paper argues that the government and financial institutions will also have an important role to play in the transition process. They will lead from behind, however, in that they will facilitate the incentive schemes, which will subsequently be absorbed by consumers and merchants. While some of the incentives proposed in the paper are specific to the Albanian financial environment, others can be generalised to other countries in the Balkans.